Wall Street Shows Its 'bouncebackability': McGeever

By Jamie McGeever

ORLANDO, Florida, Feb 5 (Reuters) - "Bouncebackability."

This Britishism is generally connected with cliche-prone soccer managers trumpeting their teams' ability to respond to defeat. It's not likely to find its way across the pond into the Wall Street crowd's lexicon, however it completely summarizes the U.S. stock market's durability to all the setbacks, shocks and whatever else that's been tossed at it recently.

And there have been a lot: U.S. President Donald Trump's tariff flip-flops, stretched appraisals, extreme concentration in Big Tech and the DeepSeek-led turmoil that just recently called into question America's "exceptionalism" in the worldwide AI arms race.

Any among those problems still has the prospective to snowball, causing an avalanche of selling that might press U.S. equities into a correction or even bear-market territory.

But Wall Street has actually ended up being extremely durable since the 2022 thrashing, particularly in the last 6 months.

Just take a look at the synthetic intelligence-fueled chaos on Jan. 27, spurred by Chinese startup DeepSeek's discovery that it had actually developed a big language model that could attain similar or much better results than U.S.-developed LLMs at a fraction of the cost. By many steps, setiathome.berkeley.edu the market move was seismic.

Nvidia shares fell 17%, slicing almost $600 billion off the company's market cap, the biggest one-day loss for any company ever. The worth of the broader U.S. stock market fell by around $1 trillion.

Drilling much deeper, experts at JPMorgan discovered that the rout in "long momentum" - essentially buying stocks that have actually been performing well recently, such as tech and AI shares - was a near "7 sigma" relocation, or 7 times the standard deviation. It was the third-largest fall in 40 years for this trading method.

But this epic move didn't crash the market. Rotation into other sectors sped up, and around 70% of S&P 500-listed stocks ended the day greater, meaning the more comprehensive index fell only 1.45%. And buyers of tech stocks quickly returned.

U.S. equity funds brought in almost $24 billion of inflows recently, technology fund inflows struck a 16-week high, and momentum funds brought in favorable circulations for a fifth-consecutive week, according to EPFR, the fund flows tracking company.

"Investors saw the DeepSeek-triggered selloff as an opportunity rather than an off-ramp," EPFR director of research Cameron Brandt composed on Monday. "Fund streams ... recommend that a lot of those financiers kept faith with their previous assumptions about AI."

PANIC MODE?

Remember "yenmageddon," the yen bring trade volatility of last August? The yen's abrupt bounce from a 33-year low against the dollar stimulated worries that investors would be forced to sell properties in other markets and countries to cover losses in their big yen-funded carry trades.

The yen's rally was extreme, on par with past monetary crises, and the Nikkei's 12% fall on Aug. 5 was the biggest one-day drop given that October 1987 and the second-largest on record.

The panic, if it can be called that, spread. The S&P 500 lost 8% in two days. But it disappeared quickly. The S&P 500 recovered its losses within 2 weeks, oke.zone and the Nikkei did similarly within a month.

So Wall Street has passed two huge tests in the last six months, a duration that consisted of the U.S. presidential election and Trump's go back to the White House.

What explains the resilience? There's nobody obvious answer. Investors are broadly bullish about Trump's financial agenda, the Fed still appears to be in relieving mode (for now), the AI frenzy and U.S. exceptionalism stories are still in play, and liquidity abounds.

Perhaps one crucial motorist is a well-worn one: the Fed put. Investors - a number of whom have actually invested a great chunk of their working lives in the era of extremely loose monetary policy - may still feel that, if it actually comes down to it, the Fed will have their backs.

There will be more pullbacks, and threats of a more extended recession do seem to be growing. But for now, systemcheck-wiki.de the rebounds keep coming. That's bouncebackability.